2. Question

Through corrections by governments in the form of changes in spending, taxation and the money supply

Through protectionist corrections in the form of tariffs and quotas on imported goods and services

By discouraging technology and automation

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Question 3 of 10

3. Question

10 points

When the economy is in a recession, Keynes recommended:

All of the listed choices are suggestions Keynes supported during recessionary times

increases in government spending and decreases in taxes

for the government to run deficits

increases in the nation's money supply

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Question 4 of 10

4. Question

10 points

When the economy is in a recession, classical economists recommend:

for the government to become less involved in the economy and to allow free market forces to improve the economy

for the government to become more involved and to increase taxes and regulations on businesses

for the central bank to significantly increase the money supply and lower interest rates

for the government to impose restrictions on foreign trade and immigration

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Question 5 of 10

5. Question

10 points

According to our text, following Keynesian recommendations may lead to economic stimulus in the __________, but will harm the economy in the __________.

short run; long run

long run; short run

domestic economy; international economy

real economy; underground economy

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Question 6 of 10

6. Question

10 points

In the Keynesian model, the relationship between the multiplier and the change in government spending is as follows:

multiplier * change in government spending = change in total spending in the economy

change in government spending = multiplier * change in total spending in the economy

change in government spending + change in total spending in the economy = multiplier

change in government spending/multiplier = change in total spending in the economy

Correct

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Question 7 of 10

7. Question

10 points

In the Keynesian model, if the marginal propensity to consume is .8 and a country’s government spends an additional $60 billion, what is the change in total spending in the economy?

total spending in the economy increases by $300

total spending in the economy increases by $48

total spending in the economy increases by $480

total spending in the economy decreases by $250

Correct

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Question 8 of 10

8. Question

10 points

In the Keynesian model, if the MPS is .25 and the government increases taxes by $40 billion, then what is the change in total spending in the economy?

Total spending in the economy decreases by $120 billion

Total spending in the economy decreases by $160 billion

Total spending in the economy increases by $120 billion

Total spending in the economy increases by $160 billion

Correct

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Question 9 of 10

9. Question

10 points

In the Keynesian model, if the MPS is .2, and if the economy experiences a recessionary gap of $500 billion, then which of the following combinations of government spending and taxation changes will eliminate the recessionary gap and bring about full employment?

An increase in government spending of $60 billion and a decrease in taxes of $50 billion

An increase in government spending of $70 billion and a decrease in taxes of $30 billion

An increase in government spending of $50 billion and an increase in taxes of $50 billion

A decrease in government spending of $40 billion and a decrease in taxes of $60 billion

Correct

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Question 10 of 10

10. Question

10 points

Classical economists emphasize stimulating the supply rather than the demand side of the economy. In the aggregate demand and aggregate supply model they illustrate that an increase in aggregate supply leads to:

an increase in real GDP and a decrease in the overall price level in the economy

an increase in real GDP and an increase in the overall price level in the economy

an increase in real GDP and a constant price level in the economy

an increase in nominal GDP and a increase in the overall price level in the economy